Art Is Hot During High Inflation

It could be said that recent auction results are proof of arts growing status as an asset that investors can trust as a hedge against inflation.

While it is an liquid asset (is not as quickly exchangeable for cash as stocks), perhaps some investors are considering this the necessary price to pay to be better protected from the unprecedented risk that inflation is posing right now.

Last week, the collection of Paul Allen (one of Microsoft’s co-founders) set a record price for the sale of an art collection. At the same time, many of the individual works in the collection set sale records for works by the respective artists, while many more, while not setting a record for the artist, far exceeded the pre-auction estimates the works were expected to fetch. It is the combination of all these factors that suggest art is increasing in its status as an inflationary hedge, as more traditional assets (e.g., gold) have fail to do so during the current bout of inflationary pressure that is squeezing almost every economy in the world.

During the first half of the auction that took place on November 9, 5 paintings sold for more than US$100 million, including work by Paul Cezanne and Georges Seurat, the latter which, fetched the highest price of the collection, at US$130 million (excluding auction fees). Works by Andrew Wyeth and Georgia O’Keeffe fetched prices at 10x and 4x their respective estimates, while Edward Steichen set a record for the second highest price ever achieved for a photograph.

Andrew Wyeth, Day Dream (detail), 1980

Art market attention will turn now to the second lot of works for sale from the collection, which hit the auction block this coming November 17.

I should temper the above by noting that a positive risk also exists for the artists participating in the Qatar World Cup. There is the distinct possibility that the events actual boosts their respective profiles, helping lift demand and prices for their artworks. Therefore, all eventual possibility should be folded into your decision making process when choosing what artists you might like to invest in.